After oil prices reached highs this year, the price recently dropped from $70 to under $60 a barrel. Though this may not be good for the oil and energy companies, the sector is Passing the Torch to other areas that can benefit from the lower prices.
Transportation is one such sector. Think about the brown UPS trucks you see everywhere, they run on gas. No matter the price, the company needs to buy gas. With lower oil prices, UPS can buy the same amount of gas at a lower rate.
iShares Dow Jones Transportation Average Fund (IYT) is an exchange traded fund that invests in transportation companies, like UPS, Fed Ex, Southwest Airlines and Union Pacific (railways). The chart below illustrates the recent affect of lower oil prices on the transportation sector.
For purpose of full disclosure, IYT is part of our client accounts.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.